LLC For Non-US Residents: Taxation, Setup, Pros & Cons

Opening an LLC for non-US residents offers significant advantages if you plan to establish a business presence in the United States.

However, setting up an LLC as a non-US resident involves understanding various legal and tax requirements, which can be quite confusing at first.

At Wanderers Wealth, we set up LLCs in the United States all the time, and we even partner with accountants for any special requests that our clients may have.

And in this guide, you’ll find the most important information you need if you are considering opening an LLC company as a non-US resident.

LLC For Non US Residents

LLC For Non-US Residents Overview

Let’s start this complete guide with the essentials you should know when it comes to opening an LLC company for non-US residents.

This is a pretty important part and I recommend reading it before getting to the main section.

What is an LLC in the United States?

An LLC (Limited Liability Company) is a U.S. business structure that protects owners from personal liability for business debts, similar to a corporation. This means that if the business owes money or is sued, the owner’s personal assets, like a house or a car, are usually safe.

LLCs also offer tax benefits. The business’s profits go directly to the owners, who then report this income on their personal tax returns.

This avoids the double taxation that you’d have with a corporation, where both the company and the owners pay taxes on the same money.

LLCs are popular because they are simple to set up, provide liability protection, and offer tax advantages.

There are different types of LLCs, and they are:

  • Single-member LLCs
  • Multi-member LLCs

Each type varies in complexity and use. Single-member LLCs have one owner, while Multi-Member LLCs have multiple owners.

This flexibility makes LLCs a popular choice for many entrepreneurs, despite being non-US residents.

Opening an LLC for non us resident

Can Non-US Residents Start an LLC?

Yes, non-U.S. residents can start an LLC in the United States. There are no citizenship or residency requirements to form an LLC, which is generally what draws entrepreneurs into opening one.

The process is generally the same as for U.S. residents, and that involves picking a state for incorporation, filing Articles of Organization, and appointing a registered agent.

However, as a non-resident, you must remember additional elements, like tax obligations and compliance with federal and state laws, which you might not be familiar with.

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How Easy Is It to Set Up an LLC for Non-US Residents?

Setting up an LLC is relatively simple for non-U.S. residents, but it does involve a few steps.

The main steps include choosing a state and an agent to register the LLC, filing the necessary paperwork with that state, and getting Employer Identification Number (EIN) from the IRS.

You also need a registered agent with a physical address in the state you’re opening the LLC in, which is certainly something to consider.

While the process is manageable, non-U.S. residents may face extra steps related to tax identification numbers and compliance with international tax laws.

At Wanderers Wealth, we set up LLCs for non-US residents all the time, and we have a smooth, straightforward process, so make sure to get in touch once you read this complete guide.

What is Exit Tax Everything You Need To Know

Is a US LLC a Good Fit for You?

A U.S. LLC is an excellent fit if you want limited liability protection and management flexibility, which is exactly what you’ll have.

It’s suitable for both small and large businesses, and you’ll get pass-through taxation, where profits are taxed on the members’ personal tax returns, avoiding double taxation.

However, consider the specific legal and tax implications in on your home country and new country before deciding.

Can You Open an American Bank Account As a Non-US Resident?

Yes, non-U.S. residents can open an American bank account, though the process can be more complicated.

In fact, there are a few requirements, such as a valid passport, proof of address, and an Employer Identification Number (EIN) for the LLC.

Some banks may also require going to the U.S. to open the account in person. For this reason, many non-US residents select fintechs and online banks for small businesses. When you purchase a US LLC through Wanderers Wealth it will come with a fully functioning US business bank account.

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How Much is the Income Tax of an LLC in the USA?

The income tax for an LLC in the USA varies depending on its tax classification.

By default, a single-member LLC is taxed as a sole proprietorship, and a multi-member LLC is taxed as a partnership, with income passing through to the owners’ personal tax returns.

Therefore, if you live in a tax-free country like the UAE where you don’t pay any personal income taxes then the US LLCs income is tax-free. If you’re unsure about the tax treatment on your personal tax return then best to reach out to your accountant.

To be clear: The LLC itself does not pay US federal income taxes. Instead, only the profits are reported on the owner’s personal tax return and taxed accordingly.

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Who is a US LLC for?

  • Nomads and Expats

If you’ve moved abroad/are travelling around and need a business entity to receive money from your global clientele then a US LLC is a good solution for you. Just make sure you are certain about the tax treatment of your US LLC on your personal tax return in your new home country.

  • Online Entrepreneurs living in so called ‘Third-countries’

In this case a US LLC can allow Online Entrepreneurs to access Online Payment Gateways so their clients can pay them with credit cards. This allows connectivity to Western Banking Solutions. Again, make sure you’re aware of the tax treatment of the US LLC on your personal tax return in your country.

  • Online Business Owners who no longer live in high taxing Western countries: Whether you’re an Online Consultant, Coach, or have an Amazon FBA, Dropshipping business or simply desire to own your property in an entity that is fully operated and managed from outside of the US territory – a US LLC is for you.

If you are still unsure whether or not a US LLC is for you or not, then we recommend you jump on a consultation session with us or you go through our self-study program BEFORE committing to a US LLC.

Other Facts to Consider

Other than the tax rates themselves, you should keep accurate records of all business expenses and income to ensure you can fill out the annual US LLC tax forms correctly.

Keep in mind that even though you’ll have to fill out annual tax forms, this doesn’t mean that you have to pay taxes in the US. In fact, if you’re operating and managing the business fully from outside of US then you’ll be taxed on its income on your personal tax return.

NB: While the focus here is on single-member LLCs, it’s worth noting that multi-member LLCs owned by non-residents operate a little differently.

By default, they are taxed as partnerships, with profits and losses passing through to the members’ personal tax returns and different tax forms need to be filed than if it’s a single-member LLC.

Despite this difference, the principle of pass-through taxation remains the same, allowing income to be taxed at the individual level rather than the corporate level.

International taxes for digital nomads

When to File Taxes for a US LLC as a Non-resident?

Non-resident owners of single-member LLCs must file two tax Forms each year by April 15th.

If you choose to form a US LLC through us at Wanderers Wealth then you’ll receive an email in due course with all the instructions of what we need from you to prepare your tax forms.

This is why it’s important to keep track of your expenses and income as you would for any business.

If you miss important annual deadlines and annual fees fines apply.

Advantages of a US LLC 

A U.S. LLC offers several advantages. It protects owners’ personal assets from business debts and liabilities through limited liability protection. To put it simply, your LLC can be sued, but not you as an individual.

It also allows for pass-through taxation, so you report profits and losses on your personal tax return, and that is great for avoiding double taxation.

With fewer compliance requirements and less paperwork compared to other corporations, you reduce administrative burdens.

Lastly, you can usually secure a US business bank account for your LLC and that’s a great way to access the US banking system.

On this blog and social media, we always talk about opening a business in a tax-friendly country or a tax haven. And while the USA is not a tax-free country, taxes in certain states like Delaware or Wyoming are relatively low, which is a good thing.

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How to Open LLC in USA For Non-Resident

Let me start by saying that opening an LLC for non-US resident isn’t that easy, especially if you haven’t done anything similar before.

For this reason, you’ll want to check out our signature service, which includes everything you need from start to finish, including an introduction to U.S. accountants we partnered with.

In case you want to have more information before starting, here’s a quick overview on how to set up an LLC as a non-US resident.

First, start by choosing a state for incorporation – I highly recommend either Delaware or Wyoming due to business-friendly laws.

Next, select a unique name for your LLC and ensure it complies with state naming requirements. File the Articles of Organization with the chosen state and pay the required filing fee.

Appoint a registered agent with a physical address in the state to handle legal documents – This step is mandatory, and it’s also included in our service, and we make it a million times easier for you.

Obtain an Employer Identification Number (EIN) from the IRS for tax purposes.

Lastly, you will also need to open a U.S. bank account and comply with any additional state-specific requirements, such as business licenses or permits.

Opening an LLC in the USA as non resident

Ongoing Annual Obligations of a US LLC

Once formed, a U.S. LLC has ongoing annual obligations to remain compliant. You must file an Annual Report or Franchise Tax Report with the state, which includes updating the state on your LLC’s business information and paying a fee.

You also need to file your annual Federal tax forms.

Staying compliant with these obligations ensures your LLC remains in good standing and avoids penalties or dissolution, which is the last thing you want in the United States.

Conclusion – Is it Worth Setting Up an LLC for Non-US Residents?

To conclude, yes, setting up an LLC in the United States can be highly advantageous for non-US residents. It offers significant benefits such as limited liability protection, tax advantages, and operational flexibility.

Yes, the process does involve a few steps and it might not be the easiest business-related task you’ve ever done in your life, but we’re here to assist you at every step of the way.

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Do you want professional help with your own International Tax Strategy and Corporate Structure?

Check out our current services. We are here to guide you and help you navigate through the complex world of International Taxes and Business Structures.

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We hope you have enjoyed this article. If you have any further questions please leave us a message below and we’ll get back to you as soon as we can.

    NOTICE: The content of this article is not to be considered as a legal opinion or tax advice. Wanderers Wealth does not hold itself out as a legal or tax advisor. If you want to receive a legal opinion or tax advice on the matter in this article please contact us directly and we will refer you to a legal practitioner.

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